Insurer M&A activity hits new low, says Clyde & Co

The insurance carrier M&A landscape saw a new 15-year low for first-half-year activity in 2024 with 103 deals, significantly lower than the previous low point of H1 2013 (162), according to Clyde & Co. The number of transactions completed in the first half of 2024 decreased by 40% compared to H1 2023 (171).

Clyde & Co said it follows a notable decline in deal volumes throughout 2023 in response to a surge in inflation and interest rate cuts. “Since then, a combination of factors has further reduced deal activity globally to a crawl. In the first half of this year, cash-rich carriers, which would traditionally have been active in the market, have been retaining capital while interest rates are high,” said the law firm.

It added that the slow pace has been exacerbated by sellers’ high pricing expectations and an increasing premium required for the integration of tech systems. Deal dynamics are also changing, with a greater emphasis placed on securing talent.

However, Clyde & Co said that the pieces of the puzzle needed to bring the market back to life may be falling into place: “Current conditions have largely not been conducive for significant deal activity, but they have enabled high performing businesses to plan growth strategies carefully. As we seemingly turn a corner, the path ahead may become clearer. Any revival is unlikely to be uniform globally, or move at the same pace, but conditions are improving.”

Eva-Maria Barbosa, partner, Clyde & Co, said: “Insurance M&A, for the remainder of 2024 and into 2025, will likely be driven by larger-scale transactions. While the total number may not increase dramatically, we are increasingly likely to see deals that span a number of jurisdictions, with some of the major carriers now looking to take on books or businesses that span eight to ten countries in one swoop.”

According to Clyde, six billion-dollar transactions closed in the first half of the year, three in the US, two in Asia and one in Europe. There were 34 cross-border transactions, focused on Europe, the Middle East and Asia.

Peter Hodgins, partner, Clyde & Co added: “The US election will bring us near the end of a period of exceptional political change. Interest rates are broadly tracking downwards. While acquirers are likely to become more bullish, sellers may be running out of road. Businesses that have relied on financing will look to divest non-core businesses or underperforming operations.”

M&A activity in the UK market remained low during the first half of the year, but speculation is increasing on an uptick in M&A activity at the larger end of the capitalisation spectrum, said Clyde. “This is particularly notable amongst UK-listed carriers, several of which have been touted as would-be takeover targets for foreign suitors,” it said.

In Europe, the impact of lower interest rates and greater political clarity, combined with the implementation of the EU mobility directive, may serve as catalysts for an increase in multi-market deals, the law firm said.

It noted that the US and Canada saw the highest number of insurance underwriting deals of any region in the first half of 2024 (40), and the US was the only region to witness multiple billion-dollar sales. However, Clyde said M&A activity in North America remains muted, but a more settled economic picture, with interest rate and inflation pressures abating, could provide the necessary deal stimulus.

For APAC, while deal activity is down year on year, this decline has been less pronounced than in the US or Europe, according to Clyde, with several large-scale, cross-border transactions, bucking the trend seen in other regions. For the Middle East, the consolidation trend continued, while in South America, Clyde said global players have continued to consolidate their positions across multiple geographies.